First Coast Service Options, Inc., Paid Some Unallowable Sleep Study Claims

During our audit period (January 1, 2011, through September 30, 2012), First Coast Service Options, Inc. (First Coast), was the Medicare administrative contractor for Jurisdiction 9, which included Florida, Puerto Rico, and the U.S. Virgin Islands. First Coast made some payments to providers for sleep study services that were not in accordance with Medicare reimbursement requirements. Of the 100 sampled beneficiaries, First Coast made payments to providers for sleep study services that did not meet Medicare billing requirements for 61 beneficiaries with 160 corresponding lines of service, resulting in overpayments totaling $68,000.

On the basis of our sample results, we estimated that First Coast overpaid providers approximately $15.7 million for sleep study services during our audit period. These errors occurred because First Coast did not have adequate claim-processing edits in place to prevent the incorrect payment of Medicare claims or because providers did not understand the Medicare requirements when billing for the services.

We recommended that First Coast (1) recover $68,000 in identified overpayments; (2) strengthen internal controls to ensure that Medicare does not pay for incorrectly billed polysomnography services, specifically by developing and implementing claim-processing edits that would prevent payment of incorrectly billed polysomnography services, which could have resulted in savings totaling approximately $15.7 million over a 21-month period; and (3) use the results of this audit in its provider education activities. First Coast concurred with our recommendations and provided information on actions that it had taken or planned to take to address our recommendations.